Construction ‘falters’: completed homes fall by 11.4%, exacerbating the lack of supply

Housing construction in Spain is showing renewed signs of weakness at a time when demand remains at record levels. In the first quarter of 2025, only 20,674 completed homes received final certification—an 11.4% year-on-year drop and the lowest figure in the past three years. This decline, affecting both private and subsidized housing, highlights a structural problem: supply is simply not keeping pace with the country’s demographic and economic growth.

Although investment in new developments has increased—construction budgets rose 18% year-on-year—this does not immediately translate into new homes ready for occupancy. Delays caused by rising construction costs, a shortage of skilled labour, and complex urban planning procedures are slowing down project completion, keeping available stock at insufficient levels. This shortage is most visible in Madrid, Barcelona, Málaga and Valencia, where demand for both buying and renting far exceeds supply.

As a result, prices continue to climb. In early 2025, the average price of free-market housing reached €2,033/m², the highest level ever recorded. The increase is particularly strong in second-hand homes and is pushing many households to a financial effort comparable to the years preceding the 2007 housing bubble.

This situation stands in stark contrast to Spain’s demographic reality. The population and number of households continue to grow, driven by immigration, labour mobility and changing family structures. The country needs more housing, yet supply is expanding far too slowly. Key obstacles include the lack of ready-to-develop land, financial constraints and regulatory uncertainty, all of which delay new projects.

To reverse this trend, the industry proposes a combination of long- and short-term solutions. A new Land Act could streamline development processes that currently take between 10 and 20 years. Meanwhile, more immediate measures include allowing greater building height to increase density in central areas, activating unused developable land, and easing conversions from commercial to residential use. Experts also advocate updating property division rules to reflect smaller household sizes.

Overall, the message is clear: Spain must accelerate housing production if it wants to stabilise prices and prevent access to housing from becoming a long-term structural problem for the majority of residents.